To work around this behavior, run Setup from within the MS-DOS environment:
Start your computer with a Windows 98 Startup disk. If you do not
have one, you may be able to create one on any computer that has a
CD-ROM drive. For information about how to do so, please see the following
article in the Microsoft Knowledge Base:
How to Create a Windows 98 Startup Disk that Supports FAT32
On the Startup menu, choose Start Computer with CD-ROM Support, and then press ENTER.
At the command prompt, type CD-ROM drive:\win98\setup, where CD-ROM drive is the drive letter assigned to
your CD-ROM drive, and then press ENTER.